Chapter 3
seem to affect the pattern's ability; confirmation is still suggested. It is also EX3fflPleS
best if each day is a Closing Marubozu.
Figure 3-62A
Reversal candle Patterns
The Meeting Lines break down into single candle lines that offer no sup- jj
port for their case (Figure 3-60 and 3-61). The single lines are similar to
the first line in the pattern, with a shadow that extends in the direction of
the second day. Again, the breakdown neither confirms the pattern nor
indicates lack of support.
Related Patterns
Somewhat opposite in appearance are the Separating Lines, which are
continuation patterns. One can also see the potential for these lines to
become a Dark Cloud Cover or a Piercing Line, if there is any penetration
of the first body by the second.
Reversal candle Patterns
Belt Hold
(yorikirf)
Confirmation is required.
Rules of Recognition
1. The Belt Hold line is identified by the lack of a shadow on one end.
Belt Hold lines are also opening marubozu lines (Chapter 2). Remember
that the opening marubozu does not have a shadow extending from the
open end of the body. The bullish Belt Hold (Figure 3-63) is a white
opening marubozu that occurs in a downtrend. It opens on the low of the
day, rallies significantly against the previous trend, and then closes near its
high but not necessarily at its high. The bearish Belt Hold (Figure 3-64) is
a black opening marubozu that occurs in an uptrend. Similarly, it opens on
its high, trades against the trend of the market, and then closes near its low.
Longer bodies for Belt Hold lines will offer more resistance to the trend
that they are countering.

Belt Hold lines, like most of the single day patterns lose their impor-
tance if there are many of them in close proximity. The Japanese name of
yorUdri means to push out. Steve Nison coined the name of Belt Hold.
Chapter 3
Reversal candle Patterns
2. The bullish white Belt Hold opens on its low and has no lower
shadow.
3. The bearish black Belt Hold opens on its high and has no upper
shadow.
Scenarios and Psychology Behind the Pattern
The market is trending when a significant gap in the direction of trend
occurs on the open. From that point, the market never looks back: all
further price action that day is the opposite of the previous trend. This
causes much concern and many positions will be covered or sold, which
will help accentuate the reversal.
Pattern Flexibility
Since this is single candle line pattern, there is not much room for any
flexibility. It should be a long day. Remember, a day is considered long in
relation to the previous few days only.
Pattern Breakdown
Single candle line patterns cannot be reduced further.
Related Patterns
The Belt Hold pattern is the same as the Opening Marubozu, discussed in
Chapter 2. Like the Marubozu, the Belt Hold will form the first day of
many more advanced candle patterns.
Examples
Figure 3-65A
chapter 3
Figure 3-65B
Reversal Candle Patterns

I unique Three River Bottom
s
(sankawa soko zukae)
Bullish reversal pattern.
Confirmation is not required, but is suggested.
%
Figure
3-66
Commentary
As demonstrated by Figure 3-66, the Unique Three River Bottom is a
pattern somewhat like a Morning Star. The trend is down and a long black
real body is formed. The next day opens higher, trades at a new low, then
closes near the high, producing a small black body. The third day opens
lower, but not lower than the low that was made on the second day. A
small white body is formed on the third day, which closes below the close
of the second day. The Unique Three River Bottom is extremely rare.
Rules of Recognition
1. The first day is a long black day.
v
2. The second day is a Harami day, but the body is also black.
3. The second day has a lower shadow that sets a new low.
4. The third day is a short white day which is below the middle day.
Chapter 3
Scenarios and Psychology Behind the Pattern
A falling market produces a long black day. The next day opens higher,
but the bearish strength causes a new low to be set. A substantial rally
ensues in which the strength of the bears is in question. This indecision
and lack of stability is enforced when the third day opens lower. Stability
arrives with a small white body on the third day. If, on the fourth day,
price rises to new highs, a reversal of trend has been confirmed.

Pattern Flexibility
Because this is such an unusual and precise pattern, there is not much
flexibility. If the lower shadow on the second day were quite long, the
greater potential for reversal would be more likely. In some literature, the
second day resembles a Hammer line. Like many reversal patterns, if
volume supports the reversal, the success is likely to be greater.
The Unique Three River Bottom pattern reduces to a single line that most
likely is a Hammer line (Figure 3-67). The lower shadow must be at least
twice as long as the body to be a Hammer, which, in this case, is quite
possible because of the long lower shadow on the second day. The Ham-
mer fully supports the bullishness of the Unique Three River Bottom pat-
tern.
Reversal Candle Patterns
Related Patterns
This pattern is a take-off of the Morning Star, but doesn't look anything
like it. Its appearance in Japanese literature is part of the Sakata Method
(see Chapter 5).
Example
Figure
3-68
911013 (1901
Chapter 3
Reversal Candle Patterns
Commentary
The Three White Soldiers pattern is a vital part of the Sakata Method
described in Chapter 5. It shows a series of long white candlesticks which
progressively close at higher prices. It is also best if prices open in the
middle of the previous day's range (body). This stair-step action is quite
bullish and shows the downtrend has abruptly ended.
Rules of Recognition

1. Three consecutive long white lines occur, each with a higher close.
2. Each should open within the previous body.
3. Each should close at or near the high for the day.
Scenarios and Psychology Behind the Pattern
The Three White Soldiers pattern occurs in a downtrend and is repre-
sentative of a strong reversal in the market. Each day opens lower but then
closes to a new short term high. This type of price action is very bullish
and should never be ignored.
Pattern Flexibility
The opening prices of the second and third days can be anywhere within
the previous body. However, it is better to see the open above the midpoint
of the previous day's body. Keep in mind that when a day opens for
trading, some selling has to exist to open below the previous close. This
suggests that a healthy rise is always accompanied by some selling.
The Three White Soldiers pattern reduces to a very bullish long white
candle line (Figure 3-70). This breakdown is in full support of the pattern,
which makes confirmation unnecessary.
Chapter 3
Related Patterns
See the next two patterns, Advance Block and Deliberation.
Examples
Figure 3-71
Reversal candle Patterns
Commentary
As shown in Figure 3-72, this pattern is a derivation of the Three White
Soldiers pattern. However, it must occur in an uptrend, whereas the Three
White Soldiers must occur in a downtrend. Unlike the Three White Sol-
diers pattern, the second and third days of the Advance Block pattern show
weakness. The long upper shadows show that the price extremes reached
during the day cannot hold. This type of action after an uptrend and then

for two days in a row should make any bullish market participants nerv-
ous, especially if the uptrend was getting overextended.
Remember, that this pattern occurs in an uptrend. Most multiple-day
patterns begin with a long day, which helps support the existing trend. The
two days with long upper shadows show that there is profit taking because
the rise is losing its power.
Chapter 3
Rules of Recognition
1. Three white days occur with consecutively higher closes.
2. Each day opens within the previous day's body.
3. A definite deterioration in the upward strength is evidenced by long
upper shadows on the second and third days.
Scenarios and Psychology Behind the Pattern
The scenario of the Advance Block pattern closely resembles the events
that could take place with the Three White Soldiers pattern. This situation,
however, does not materialize into a strong advance. Rather, it weakens
after the first day because the close is significantly lower than the high.
The third day is as weak as the second day. Remember, weakness in this
context is relative to the Three White Soldiers pattern.
Pattern Flexibility
Defining deterioration is difficult. Although this pattern starts out like the
Three White Soldiers, it doesn't produce the upward strength and each day
shows smaller body length and longer shadows. The second and third day
need to trade higher than their closes.
Pattern Breakdown
Figure
3-73
Reversal candle Patterns
The Advance Block pattern reduces to a long white candle line that is not
quite as long as the Three White Soldiers breakdown (Figure 3-73). This

long white candlestick also has a long upper shadow, which shows that the
prices did not close nearly as high as they got during the trading days.
Because of this, the Advance Block is viewed as a bearish pattern. In most
cases, this could only mean that long positions should be protected.
Related Patterns
This is a variation of the Three White Soldiers (discussed previously) and
the Deliberation pattern (explored next).
Examples
Figure
3-74
Chapter 3
Deliberation
(oka sansei shian boshi)
Bearish reversal pattern.
Confirmation is suggested.
Figure 3-75
Commentary
As illustrated in Figure 3-75, the Deliberation pattern is also a derivative
of the Three White Soldiers pattern. The first two long white candlesticks
make a new high and are followed by a small white candlestick or a star.
This pattern is also called a Stalled pattern in some literature. It is best if
the last day gaps above the second day. Being a small body, this shows the
indecision necessary to arrest the upmove. This indecision is the time of
deliberation. A further confirmation could easily turn this pattern into an
Evening Star pattern.
Rules of Recognition
1. The first and second day have long white bodies.
2. The third day opens near the second day's close.
Reversal candle Patterns
3. The third day is a Spinning Top and most probably a star.

Scenarios and Psychology Behind the Pattern
This pattern exhibits a weakness similar to the Advance Block pattern in
that it gets weak in a short period of time. The difference is that the
weakness occurs all at once on the third day. The Deliberation pattern
occurs after a sustained upward move and shows that trends cannot last
forever. As with the Advance Block, defining the deterioration of the trend
can be difficult.
Pattern Flexibility
If the third white body is also a star, watch for the next day to generate a
possible Evening Star pattern.
Pattern Breakdown
Figure 3-76
The Deliberation pattern reduces to a long white candlestick (Figure 3-76).
This is in direct conflict with the pattern itself which suggest the need for
further confirmation. A gap down on the following day would produce an
Evening Star and therefore support this pattern's bearishness.
Chapter 3
Related
Patterns
.
Three
Black
Crows
See the
previous
two
patterns,
the
Three
White

Soldiers
and
Advance
1 / i.
mram
\
Block.
I
\
smba
8
arasu
)
Reversal Candle Patterns
Example
Figure
3-77
•1O3O3 [2IB1
Commentary
The Three Black Crows is the counterpart of the Three White Soldiers
pattern. Occurring during an uptrend, three long black days are stairstep-
ping downward. "Bad news has wings," an old Japanese expression, easily
fits this pattern. Each day opens slightly higher than the previous day's
close, but then drops to a new closing low. When this occurs three times,
a clear message of trend reversal has been sent. Be careful that this down-
ward progression does not get overextended, that would surely cause some
bottom picking from the eternal bulls.
Rules of Recognition
1. Three consecutive long black days occur.
^ 2. Each day closes at a new low.

3. Each day opens within the body of the previous day.
4. Each day closes at or near its lows.
Chapter 3
Scenarios and Psychology Behind the Pattern
The market is either approaching a top or has been at a high level for some
time. A decisive trend move to the downside is made with a long black
day. The next two days are accompanied by further erosion in prices
caused by much selling and profit taking. This type of price action has to
take its toll on the bullish mentality.
Pattern Flexibility
It would be good to see the real body of the first candlestick of the Three
Black Crows under the prior white day's high. This would accelerate the
bearishness of this pattern.
Reversal Candle Patterns
Related Patterns
A more rigid version of this pattern is the Identical Three Crows (see the
following pattern).
The Three Black Crows pattern reduces to a long black candlestick, which
fully supports this pattern's bearishness (Figure 3-79).
Chapter 3
Identical Three Crows
(doji sanba garasu)
Bearish reversal pattern.
No confirmation is required.
Commentary
This is a special case of the Three Black Crows pattern discussed earlier.
The difference is that the second and third black days open at or near the
previous day's close (Figure 3-81).
Rules of Recognition
1. Three long black days are stair-stepping downward.

2. Each day starts at the previous day's close.
Reversal Candle Patterns
Scenarios and Psychology Behind the Pattern
This pattern resembles a panic selling that should cause additional down-
side action. Each day's close sets a benchmark for opening prices the next
trading day. There is a total absence of buying power in this pattern.
pattern Flexibility
Because this pattern is a special version of the Three Black Crows pattern,
flexibility is almost nonexistent.
Pattern Breakdown
Figure
3-82
Like the Three Black Crows pattern, the Identical Three Crows reduces to
a long black candlestick (Figure 3-82). This fully supports the pattern's
bearish implications.
Related Patterns
This is a variation of the Three Black Crows pattern.
Chapter 3
Example
Figure 3-83
Reversal candle Patterns
Breakaway
(hanare sante no shinte zukae)
Confirmation is recommended, especially for the bearish Breakaway pat-
tern.
Figure 3-84 Figure 3-85
D
Commentary
Bullish Breakaway
The bullish Breakaway pattern comes during a downtrend and represents

an acceleration of selling to a possible oversold position. The pattern starts
a long black day followed by another black day whose body gaps
down (Figure 3-84). After the down gap, the next three days set consecu-
tively lower prices. All days in this pattern are black, with the exception of
•the third day, which may be either black or white. The three days after the
.gap are similar to the Three Black Crows in that their highs and lows are
each consecutively lower. The last day completely erases the small black
days and closes inside the gap between the first and second days.
The bearish Breakaway pattern involves a gap in the direction of the trend
followed by three consecutively higher price days (Figure 3-85). In an
Chapter 3
uptrend, a long white day is formed. Then the next day, prices gap upward
to form another white day. This is followed by two more days which set
higher prices. The color of the days should be white with only one excep-
tion: the third day of the pattern, or the second day after the gap, may be
either black or white as long as a new high price has been made. The low
prices set in the three days after the gap should also be higher than each
previous day's low price. The idea of this pattern is that prices have
accelerated in the direction of trend and an overbought situation is devel-
oping. The last day sets up the trend reversal by closing inside the gap of
the first and second days.
Japanese literature does not discuss a bearish version of the Breakaway
pattern. I decided to test such a pattern and have found that it works quite
well. See Chapter 6 for results.
Rules of Recognition
1. The first day is a long day with color representing the current trend.
2. The second day is the same color and the body gaps in the direction
of the trend.
3. The third and fourth days continue the trend direction, with closes
consecutively greater in the direction of trend.

4. The fifth day is a long opposite-color day that closes inside the gap
caused by the first and second days.
Scenarios and Psychology Behind the Pattern
It is important to realize what is being accomplished here: the trend has
accelerated with a big gap and then starts to fizzle, but it still moves in the
same direction. The slow deterioration of the trend is quite evident from
this pattern. Finally, a burst in the opposite direction completely recovers
the previous three days' price action. What causes the reversal implication
is that the gap has not been filled. A short-term reversal has taken place.
Reversal candle Patterns
pattern Flexibility
Because this is a complex pattern, it is difficult to discuss flexibility. As
long as the basic premise is maintained, this pattern can offer some flexi-
bility. There could be more than three days after the gap as long as the last
day of the pattern closes inside the initial gap. It is also possible to have at
least two days after the gap.
The bullish Breakaway pattern reduces into a possible Hammer line (Fig-
ure 3-86). The lower shadow must be twice the length of the body for it to
qualify as a Hammer. This is quite possible if the gap on the second day is
large and followed by significantly lower prices on days three and four.
This, of course, supports the pattern.
The bearish Breakaway pattern reduces to a long candle line with a
white body at the lower end of its range (Figure 3-87). Chances are that
this would not be a Shooting Star because of the large gap on the second
day and the higher prices that followed. It seems that the bearish Break-
away would require further confirmation before selling.
\
Related Patterns
Because of this pattern's complexity, there are no related patterns.
Reversal candle Patterns